Key Barriers to Digital Trade

Businesses engaged in international trade depend on digital networks to manufacture products, manage global value chains, and provide cutting-edge services. In the 2018 National Trade Estimate (NTE), USTR identified the key barriers to digital trade, a critical element of U.S. competitiveness and a key source of U.S. innovation and growth.

The digital trade is under threat from a growing number of laws and regulations that block the flow of data across borders, impede the provision of services such as cloud computing, or otherwise restrict the ability of firms to take advantage of best-in-class digital services. Some of these government actions are explicitly protectionist, while others impose unnecessary burdens on digital trade in seeking to address legitimate public policy goals.

In December 2017, the United States joined 70 other WTO Members in initiating exploratory work on possible future negotiations on these issues. The Trump Administration intends to use these discussions as a valuable forum to develop commercially meaningful rules that address restrictions on digital trade, and will work with like-minded WTO Members who share the Administration’s interest in moving forward on digital trade issues within the WTO.

The key barriers to digital trade identified in the 2018 NTE include:

China’s Restrictions on Cross-Border Data Flows and Data Localization Requirements: China’s 2017 Cybersecurity Law and 2015 National Security Law prohibit or severely restrict routine cross-border transfers of information and impose data localization requirements on companies in “critical information infrastructure sectors.”

China’s Restrictions on Leased Lines and VPNs: In 2017, China issued a circular that imposes severe restrictions on the use of leased lines and virtual private networks (VPNs), which are commonly used in the course of supplying a wide range of services to ensure the security and confidentiality of information transferred across borders.

China’s Cloud Computing Restrictions: China severely restricts investment in cloud computing services, which affects companies that supply cloud computing services and those that need to source such services. In addition, the 2017 circular on leased lines and VPNs effectively prohibits the use of leased lines and VPNs in providing cloud computing services on a cross-border basis.

China’s Web Filtering and Blocking: China continues to engage in extensive blocking of legitimate websites. China currently blocks 12 of the top 30 global sites and up to 3,000 sites in total, affecting billions of dollars in potential U.S. business.

EU Member States’ News Aggregation Fees: Certain European Union Member States have instituted measures that require online aggregation services—platforms providing news text and images excerpted from linked sources—to remunerate or obtain authorization from the original sources for the use of such content. These measures impose financial and operational burdens on U.S. firms that help drive traffic to publishing sites.

Russia’s Data Localization Requirements: Russian law requires that certain data on Russian citizens collected electronically by companies be processed and stored in Russia. Many U.S. companies face a choice between withdrawing from the Russian market and operating under significant legal uncertainty.

Turkey’s Data Localization Requirements: Turkey limits transfers of personal data out of Turkey and, in many cases, requires firms to store data on Turkish citizens within Turkey. A separate law requires all suppliers of electronic payment services, including those that are Internet-based, to maintain primary and secondary information systems within Turkey.

Further information is available at ustr.gov.